The first three cheap web hosting services that I checked all had terms of services that made them unsuitable. Bluehost.com even prohibits "profanity" which I presume means that websites hosted by bluehost need to have language filters. I cannot guess why they care.

The terms of service for hostmetro.com don't seem to prohibit erotic content. They have a long list of explicitly forbidden things that noticeable fails to mention erotic content, but that's no guarantee.

It seems like choosing the right host would be a long and tedious process of reading terms of service to find the right service and the lowest price.

It might be easier to host a site for general fiction that just happens to allow erotic content, because then it wouldn't technically be an erotic website. It would just be a fiction website that doesn't monitor its submitted stories for content.